Sunday, December 29, 2013

Window on Eurasia: Could Water Replace Oil and Gas as Russia’s Main Export?

Paul
Goble

Staunton, December 29 – Many believe
that once Russia runs out of oil and gas to export, it will have to modernize
its economy and thus its political system. But if some in Russia’s development
ministry have their way, such changes could be put off more or less
indefinitely because soon Russia might then sell another raw material it has in
abundance: water.

Natural Resources Minister Sergey
Donskoy said that the Russian Federation would be able to extract and export
oil and gas at their current levels for “a maximum of ten years,” something
that means, experts say, Russia can maintain Vladimir Putin’s favored “raw
materials economic model” only for a few more years (svpressa.ru/economy/article/79757/).

Last week, as Arina Raksina of “Novyye
izvestiya” reports, Russia’s Ministry of Economic Development published a
National Export Strategy for Russia through 2030 to address the question of
what Russia might do if and when it can no longer export oil and gas at current
levels (newizv.ru/economics/2013-12-26/194850-potoki-soznanija.html).

This year, 71 percent of Russia’s
exports consist of oil and gas, a historic high and up from “less than 50
percent” a decade ago. At the same time, the share of exports made up by
machinery has fallen from 10 percent to five percent and 40 percent of these
are now made up of military goods.

Most of
the ministry’s proposals call for a diversification of Russia’s exports by
means of a diversification of its industrial production, but one calls for
substituting another natural resource – fresh water – for the oil and gas which
Russian experts say the country will run short of in the coming years.

The
ministry notes that the Russian Federation has ten percent of the world’s fresh
water supplies, second only to Brazil.Moscow
could export such water – the idea has been floated before in the form of
Siberian river reversal – without having to change its economic model or the political
system based on it.

Most
independent experts, however, are deeply skeptical about this idea, Raksina
notes.Nikolay Mezhevich, a scholar at
the Moscow Institute of Regional Economic Problems, says that “it is very
premature to speak about the export of fresh water,” especially since “Russia
at present does not have adequate technological possibilities for exporting
water” to the places I the Middle East or Africa which need it most.

To
do so, he continues, would require that the price of water rise far beyond what
many expect so that the means of exporting it could be profitable.

Diverting
Siberian river water to Central Asia is more immediately possible, he
acknowledges, although he notes that concerns about the environmental impact on
Russia itself appeared to have killed this idea in Gorbachev’s time.Now, however, there may be new interest in
such a possibility.

But Mezhevich remains pessimistic. “Unfortunately,”
he says, “Russia does not now have a chance to reorient its exports away from
fuels and in the near term it won’t acquire one.” Thus, talking about replacing
the export of one kind of resources by another ultimately is “not serious.” But
while he does not say it, what is interesting is that some in Moscow are doing
just that.

And the reason they are doing so is
obvious: the kind of political system that Vladimir Putin has erected is
possible only if Russia remains a raw materials exporter.If it became a more modern and diverse
economy in order to sell a wider range of goods abroad, pressure to change the
political system would grow to the point that current arrangements would be
threatened.